As mentioned in the last cycle post I submitted (the one with which this post replies to) I was looking for a move up to approximately the 2050 level and a breaking of the 50DMA and for the most part we got it, well almost anyway. While we did get 2050 on a closing basis we were unable to break through the 50DMA which appears to be currently acting as a resistance level. If we are to get back to 2100 then the obvious must happen, the 50DMA must become support and not resistance.
The past couple of weeks' Eco #'s may have played a big part in what we have seen lately with this weeks numbers not being any different, an unsettling churn of volatility. The market internals appear to be in a wrestling match where a lot of mixed signals have been sent. For instance Consumer spending and ISM were up with some mystery component of this index showing job creation in the manufacturing area. Jobless claims dipped, Production Growth and orders were down. Then the big capper, "Job Creation" in which 21,000 new jobs were created. This was a dismal number, absolutely pathetic. What's more important though is did the market like it or not. On the one hand it has been said that this is good for the markets and stocks in general because the Fed will have to continue to keep rates low. On the other hand, people are beginning to realize that a recovery is unsustainable without job creation. So just what do we have? A big ole mixed bag of nuts, that's what! Mr. Market is troubled by these numbers, yet it seems as though it wants to go higher.
So what can we expect for the week to come? You got me, I think it will go the way da Boyz want to spin it. Good #'s, Bad #'s, it just doesn't really seem to matter in the big picture of things (at least at this juncture). For the most part I expect to see more volatility while da Bulls and da Bears duke it out.
We are at an interesting part of the Bradley Cycle though where we have what I have referred to as "a flurry of mini cycles" in progress. After this turn on the 10th, another is expected on the 16th, the 22nd and then the 24th with the 24th being the resolution to this flurry of mini turns. We could quite possibly just churn for the time being, range bound at best.
One possible scenario and set-up that is currently playing out on the COMPQ is that we are still in a downtrend eventhough the bias is currently to the upside. We have been making a succession of lower highs and lower lows since the big cycle turn back on Jan 27th where we topped out in the 2150 area. In the chart below you can see what I am getting at here and that is if we do not break through this 50DMA with authority, we are more than likely setting up for another lower high and going to another lower low, probably somewhere around the 1980 area. If 2000 acts as support, I would view this positively. I could be wrong, but that would break the trend of lower lows and set 2000 as pretty solid support going forward.
While I do not follow the SPX and INDU as closely, they seem to be holding up much better than COMPQ. Although without Tech leading the charge I think it has started to become evident that even these indices are starting to show some weakness.
The $SPX seems to be the strongest of the 3 amigos right now although it could be putting in a triple top with 1160 being the ceiling on this one...
The INDU on the other hand is flirting with its 50DMA at the moment...
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